Ralph Lauren Doubles Down on Canada: What The Brand Must Get Right to Succeed
Legendary American brand and retailer Ralph Lauren took a major step in its Canadian expansion this month, opening their first full-price store in Toronto and launching a dedicated Ecommerce site. Although Ralph Lauren has been selling merchandise in Canada for years through wholesale and outlet stores, launching and operating a premium full-price branded retail store and dedicated digital property are a clear indication of their growth ambitions in a market that has long puzzled American entrants.
Canada has proven to be a notoriously difficult market for American retailers. Although some retailers have, eventually, realized successful expansions (e.g., Walmart, The Home Depot, Costco), the well-publicized and costly retreats of corporations like Target, Nordstrom, Lowes, and Ulta, to name a few, underscore how difficult the leap northward can be.
To understand Ralph Lauren’s formidable challenge, we analyzed numerous publications and public databases to understand this unique growth opportunity. We identified 3 key factors that underlie successful US to Canada expansion strategies that brands like Ralph Lauren must emulate:
1. Deeply understand the Canadian market potential and its intricacies
When evaluating any growth opportunity, the first 2 questions a retailer or brand should ask are: 1) how big and attractive is the opportunity? and 2) how challenging would it be to pursue it?
The calculus here is tough for US retailers: Canada only represents a moderate market opportunity, set in a very complex operating environment. First off, Canada’s population of roughly 40 million people and GDP of about $2T mean that even very successful consumer products enterprises have a capped market potential. Additionally, this population, representing approximately a tenth of the US population, is spread out geographically, with vast distances between major cities, making the supply chain and logistics challenge formidable.
Further, Canada’s provincial intricacies and cultural diversity require a well-thought-out administrative and logistical strategy. For example, Canadian operations will likely need dual-language offices and customer service, and will need to account for province-specific tax and legal codes. Retailers may need to prepare localized marketing and assortments to account for regional culture. Because of these added complications, a higher level of selling profitability is often required to make up for the added operational expenses.
The competitive landscape is even more challenging for upscale brands like Ralph Lauren. Canada ranks fairly low among developed nations when it comes to overall luxury sales, and there is already significant legacy competition plus new entrants to the market (18+ new luxury brands or retailers have entered Canada since 2019 according to Retail Insider). Any new luxury retailer must be able to boast a significant differentiation from the new and established players.
2. Deliberate expansion has succeeded, opportunistic expansion has not
Given these complexities, Canadian expansion requires careful planning and a long-term commitment. Some US retailers entered opportunistically on the heels of the US financial crisis and fared poorly, while Walmart, Costco, and Home Depot approached with a long-term vision and operational discipline, gaining a successful foothold. Deliberate expansion often implies establishing a separate Canadian office that can make strategic decisions with an insider perspective; Walmart, Costco, and Home Depot have all taken this approach.
In contrast, rapid, opportunistic entry has not been successful. After deciding to close all stores in 2015, Target CEO Brian Cornell said, “We missed the mark from the beginning by taking on too much too fast.” Success lies in thorough research, starting small, and gradual scaling and tailoring the business to local market and consumer dynamics.
3. Balance adhering to global standards while driving local resonance
Lastly, one of the most vital pillars of success in international expansion, especially in the Canadian market, is employing a “Glocal” approach. This implies striking the right balance between appealing to the heritage of an iconic global brand and appealing to local Canadian culture.
Home Depot, one of the biggest successful entrants to Canada, deployed a glocal approach in its market entry activities. When expanding into the province of Quebec, the company realized there were 5,000 products in the assortment that were not a good fit for the Quebec market and that even having a Toronto-based management team was not working. The company quickly assembled a local Quebec team, and although the Home Depot branding, footprint, and store experience remained the same (Global), the assortment was localized, featuring a larger paint selection, a strong emphasis on home decor, and items that catered to the European influences strongly present in the province.
What’s Next for Ralph Lauren
Ralph Lauren appears poised to rise to the challenges in the Canadian market with a gradual test and learn approach. Testing the waters through wholesale distribution and outlet stores provides valuable insights on market appetite for the brand and customer preferences before investing in dedicated retail and Ecommerce. A luxurious flagship store experience, heavily weighted toward their most premium product lines, with a luxurious look and feel and personalized client services, can help establish brand equity and consideration among Canada’s luxury shoppers. We look forward to following along to understand how Ralph Lauren’s entry fits into the framework of the company’s larger growth strategy to build their ‘Next Great Chapter: Accelerate,’. However, given the unique challenges of the Canadian market and its limited number of luxury shoppers, success will hinge on continued careful planning, operational discipline, and successful deployment of a glocal approach that resonates with the target customer.
If you are a brand or retailer considering international expansion, contact us at McMillanDoolittle and stay tuned for other retail analysis.